EVP and CFO Daniel Durm purchased around $935,000 worth or 3,250 shares of Adobe stock (ADBE) at an average price of $288.11 per share on Sep. 22, 2022. The shares have lost around 60% of their value in a year.

The company has entered into a definitive merger agreement to acquire Figma, a leading web-first collaborative design platform, for roughly $20 billion in cash and stock. The acquisition price, which is more than 50 times annualized recurring revenue, or ARR, of Figma, has rattled some investors. ADBE lost 17% the day this deal was announced on September 15, 2022.  

But the acquisition seems like a solid strategic fit. Further, Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both part of the broader Creative Cloud, now offered via a subscription model, thereby improving revenue visibility and marketability. The company has added new products and features to the suite through organic development and bolton acquisitions to drive the most comprehensive toolset used in print, digital, and video content creation.

Disruption from inadequate integration efforts following major acquisitions, including Magento and Marketo in 2018, which have helped build Digital experience, remain a concern. Further, Adobe may overpay for some large deals. But the firm has so far demonstrated its ability to both integrate acquisitions smoothly and deliver solid financials. We expect no less in the foreseeable future. 

Adobe enjoys a solid economic moat, arising from high switching costs and compelling network effects (depending on the strategic business unit considered). Morninstar estimates fair value for Adobe at $450 per share, which implies a fiscal 2022 enterprise value/sales multiple of 12 times, adjusted P/E multiple of 33 times, and a 4% free cash flow yield. This is well above the current price of $288.56 (quote: Sep 23, 2022, 4:00 PM ET).

Seems like as solid an opportunity as the company itself.